The Geopolitical Impact of the Shale Revolution

Prof . Dr. Rob de Wijk

Director HCSS

Professor of IR, The Hague Campus, Leiden University

Main trends:

Multipolarity and fragmentation:

• Weakening of the West

• America’s ‘rebalancing’

• Rise of ‘Clubs’ or ad-hoc groupings

• Rise of state capitalism

• Europe’s institutional crisis and separatism

• Empowerment of the individual

Geopolitical change: It’s all about China

3

A new great game?

Pivot or rebalancing

• Announced in Foreign Policy, November 2011

• 2,500 US Marines will train in Australia

• Manila Declaration celebrating the US – 60th anniversary of the defense treaty with The Philippines.

• Naval deployments, e.g. in Singapore

• Air Sea battle

Example: the AirSea Battle Concept

Declining powers: retrenchment

• Shifting resources from peripheral to core interests.

• More emphasis on collective or cooperative security and multilateralism

• Reduce the military footprint en use the ‘retrenchment dividend’ for economic development

The Share Revolution facilitates the rebalancing

The Shale Gas Revolution and Europe

New geopolitical dynamics

• U.S. reduces energy independence on fragile states

• Shale Revolutions facilitates Rebalancing and ‘leading from behind’

New economic dynamics:

• Energy prices could drop or remain lower in the U.S.

• LNG rerouted to Europe and Japan

• US: inshoring of energy intensive industries

• Europe’s competitiveness weakens

• Reinforced by focus on low carbon economy

New regional dynamics

• Declining revenues will affect important energy exporters

• Difficult to buy off unrest

Europe

• Major reserves in France, Poland, Ukraine

• Exploration decisions driven by environmental, geopolitical and historical reasons

Poland

Origin of EU gas imports, 2010

31,80%

28,20%

14,40%

8,60%

7,70%

3,60%

2,80%

1,50% 1,30% 0,20%

Russia

Norway

Algeria

Qatar

Others

Nigeria

Libya

Trinidad and Tobago

Egypt

Turkey

Declining revenues • No challenge of energy exporting countries

with big SWF (Norway, Qatar)

• Modest challenge for highly developed states like Denmark and the Netherlands.

• Huge challenge for ‘rentier states’ without big SWF and high youth unemployment (Algeria, Russia)

Russia

• Putin´s power base is energy

• End of cheap energy

• Controversies between the states and the private sector

• High taxes and government regulation

• Too little modernization

• Aging population

Conclusion

The shale revolution:

• Facilitates ‘rebalancing’ and ‘retrenchment’

• Strategic behavior of Poland and Ukraine

• Instability in Europe´s neighbourhood

• Negative consequences for Europe´s economic development

• New economy - environment – stability nexus